Edwin Hill & Partners v First National Finance Corp [1989] 1 WLR 225

Edwin Hills (EHP) was an architecture firm contracted by L. Co, who owned a property that was heavily mortgaged to First National Finance (FNF). The development was taking a long time, so FNF decided to provide L. Co with more money to progress the project. The money was conditional that EHP should be replaced by a more prestigious firm, although there were no grounds whatsoever to criticise EHP’s work. EHP sued FNF for inducing a breach of contract.

Issues:

Whether the mortgagees were liable for inducing breach of contract by replacing the architects with a more prestigious firm as a condition of a further advance.

Held:

The appeal was dismissed. Although FNF was found to be aware of the fact that their condition on further advances would interfere with a binding contract between L Co. and EHP when FNF intended to bring the contract to an end, EHP were unable to demonstrate that FNF’s conduct was unjustified. FNF had interfered for a superior right, which was to receive principal and interest from L Co. Effectively, the contract between FNF and L Co, superseded the contract between L Co and EHP. It was considered undesirable if the law were to insist that FNF, in their position, should exercise their strict legal rights where they were justified in interference with contracts between L Co. and EHP, the third party. FNF had reached a sensible and reasonable accommodation which benefited themselves and L Co, the parties to the original contract. It was also noted that if L Co. had defaulted in their loan or if FNF had exercised their powers of sale, EHP would be in the same position and without a cause of action.